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Use The Benjamin Graham Investing Checklist To Invest Like Him
Use The Benjamin Graham Investing Checklist To Invest Like Him
Use The Benjamin Graham Investing Checklist To Invest Like Him
Jae Jun
Benjamin Graham Investing Checklist What to Expect
Benjamin Graham liked to keep things simple. In fact, his entire investing principles were
simple and disciplined.
Buy a bucket of cheap stocks at a discount to fair value, sell when it reaches NCAV.
Couldnt be simpler.
When you think of Graham, he is usually associated with cheapness, but dont forget he
was an academic at Columbia University, worked at Wall Street and made $500k at the
age of 25 in the early 1900s, formed a partnership with Jerome Newman and then went
on to write Security Analysis and the Intelligent Investor.
For such a savvy businessman and investor, Graham knew that he did not need to
complicate things. He cut out the fat in investing and used discipline and simple ideas to
generate his returns.
How?
He created a 10 point checklist (which Ill call the Benjamin Graham investing checklist)
during his Newman Partnership days. Graham filled out this checklist manually for
hundreds of stocks over and over again.
He and Walter collected numbers from the Moodys Manuals and filled out hundreds of
the simple forms that Graham-Newman used to make decisions pg 185 Snowball
You see, Graham was top of his class and he most likely had a higher IQ than you.
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But, he invested like he had a low IQ and spent all his time manually writing numbers
into a checklist to see whether it passed his investment checklist.
He was a master of the K.I.S.S (Keep It Simple Stupid) rule.
With the original list, there are some harsh requirements such as no.5. Trying to find a
NCAV stock yielding at least 2.3% in dividends with stable growth and earnings is
impossible in todays market.
Some Stocks Passing the Contemporary Graham Investment Checklist
Here are some stocks in no particular order that pass the four point Graham checklist
where current AAA bonds yield around 3.3%
Western Digital Corp (WDC)
Makes hard drives for digital content.
#1: Earnings Yield 2x AAA bond rate: Pass. Earnings yield is currently 17%.
#2: PE < 40% of highest in past 5 years: Pass.
#6: Total debt < book value: Pass. Total debt = $2.1b. Book value = $8.2b
#7: Current ratio > 2: Pass. Currently at 2.2
CF Industries (CF)
Manufacturer and distributor of nitrogen and phosphate fertilizer products.
#1: Earnings Yield 2x AAA bond rate: Pass. Earnings yield is currently 14%.
#2: PE < 40% of highest in past 5 years: Pass.
#6: Total debt < book value: Pass. Total debt = $1.6b. Book value = $5.9b
#7: Current ratio > 2: Pass. Currently at 2.3
HollyFrontier Corp (HFC)
Petroleum refiner.
#1: Earnings Yield 2x AAA bond rate: Pass. Earnings yield is currently 14%.
#2: PE < 40% of highest in past 5 years: Pass.
#6: Total debt < book value: Pass. Total debt = $1.3b. Book value = $6b
#7: Current ratio > 2: Pass. Currently at 2.22
Cooper Tire & Rubber (CTB)